Financial Crime Typologies – At a Glance
Financial crime typologies are methods or patterns used by criminals to obscure the proceeds of illicit money. These are basically strategies or procedures followed by criminals to commit fraud, launder money or finance terrorism.
Regulators and FUIs keep a careful eye on these typologies to guide Regulated Entities in identifying ML/FT risks. This is essential as it provides valuable intelligence to entities for designing their AML policies and procedures, staff training, revising their monitoring rules and reporting crime.
However, it differs from indicators which denote specific signs within typology patterns, and red flags that mean instant warnings or signs triggering investigations. Key typologies include shell companies, smurfing, wire transfers, and business investments.
AML typologies are constantly evolving as criminals find new tactics to continue financial crime; however, some of the known typologies include:
FATF regularly monitors evolving typologies and provides countries with comprehensive guidance and best practices to protect against money laundering (ML) and financing terrorism (FT). FATF typologies reports help Regulated Entities remain aware of the risks relating to their sector and product, and take proper measures for risk mitigation. Here, FATF mentions a risk-based approach for the effective implementation of FATF standards.
With this, FinCEN, MAS, FCA, EU AMLP, and AUSTRAC require Regulated Entities to assess risk, monitor rules, and report SAR/STRs. Regulators expect entities to provide clear documentation for detection and map it to the typologies.
Moreover, entities must review and refresh their monitoring rules to safeguard from new dangers. With this, entities must train staff on AML/CFT typologies to remain watchful and compliant.
RapidAML transaction monitoring model uses artificial intelligence to detect unusual behavioural patterns and compare them with the predefined typologies. With its smart data analysis, it reads between the lines and finds hidden relationships such as mule rings and shell-company structures.
The software uses automated rule libraries that translate regulatory typologies into configurable logic to monitor transactions and generate alerts for red flags. Furthermore, the software is periodically updated to align with recent insights on monitoring rules and new threats.
RapidAML also helps compliance teams with a case management software that bundles all information in one place as evidence for ease in STR/SAR reporting.
Typology is a technique or pattern used to hide the origin of illegal money, while red flags are specific behaviour, circumstance or fact appearing unusual or inconsistent.
With tools like RapidAML, typologies are reviewed and refreshed frequently, and alerts are generated instantly.
Typologies in digital banking include money mules, smurfing, synthetic identity fraud, phishing, while typologies in crypto include chain hopping, tumbling, wash trading, etc.
Regulators provide insights into recent typologies and expect entities to configure them into their monitoring models to reflect new risks and evolving threats.
Yes, automated tools such as RapidAML use artificial intelligence and machine learning to detect emerging typologies.
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